Defense acquisition reforms win cautious support
Executives from the defense and venture capital sectors offered a mixed report card on the Pentagon's push to overhaul acquisition — praising a shift toward commercial technology while warning that structural reforms still need to translate into real authority and predictable demand.
At last week's National Security Innovation Base Summit, speakers highlighted a new report from the Ronald Reagan Institute that said progress on defense modernization remains uneven despite pockets of disruptive changes. While acquisition reforms and renewed spending commitments have improved customer clarity, the report said, concerns persist about workforce capacity inside the government and whether proposed reforms will be effectively implemented.
One reform drawing cautious support is the Pentagon's move toward portfolio-based acquisition, which groups related systems into mission portfolios rather than managing each platform as a standalone program. The approach is intended to give leaders more flexibility to shift funding, adjust requirements and integrate commercial technologies faster across architectures such as missile warning and tactical communications.
Josh Wilson, chief executive of defense contractor LMI Solutions, said the model shows promise in large modernization efforts such as the Army's Next Generation Command and Control initiative, or NGC2. The program is intended to replace legacy command-and-control systems across the force with a more data-centric, open-architecture and software-driven model for command, control, communications and networked decision making.
In programs that large, Wilson said, contractors typically have to navigate three separate communities: requirements owners, acquisition officials and operational users. Under the NGC2 approach, those groups are working side by side.
"They're all there, in one place, having the same experience on how well this is working or not working, and it's very clear to see where the gaps are and where to engage," Wilson said.
Wilson said the portfolio-based structure is promising because "we're saying these folks own the outcomes ... But there's an ocean between saying that and giving them the authority and operationalizing that."
The defense market is behaving differently
"There's no question that this marketplace is feeling more commercial," Wilson said, commenting that winning contracts is increasingly about proving capability rather than relying on a long record of past defense work.
"It's less about white papers or how good we are at responding to RFPs," Wilson said. "There's a real shift to demonstrate ability, not years of experience."
That shift is forcing companies to rethink how they compete for Pentagon work, placing greater emphasis on research and development and less on traditional proposal writing and business development.
A commercially oriented contracting model, he said, "changes the cost structure, and it changes how you operate as a company." Wilson added: "I give this administration's emphasis on this huge kudos and credits for that, but it's changed the way you have to do business."
In this environment, he said, the traditional goal of locking in a long-term "program of record" may matter less than it once did. Program managers increasingly want vendors to understand that "you are replaceable," Wilson said.
Incumbents not guaranteed to win
"We had a cottage industry where people were awarded massive contracts because they had past performances that went back a decade, and they were really good at responding to RFPs. We have to challenge that."
Investors say the shift toward commercial technology is real, but the Pentagon still needs to provide clearer signals about demand.
Mike Brown, a venture investor and former director of the Defense Innovation Unit, said government adoption of commercial technology will inevitably involve failure — something venture capital firms already expect.
"From the venture capital standpoint, we go into our investment knowing that most companies will fail, so we don't expect the government should be buying everything that we're investing in, but we expect the government to be clear about what categories they need," Brown said.
For investors, he said, what matters most is visibility into which capabilities the Pentagon plans to scale.
Companies also need stronger demand signals through longer-term funding commitments.
The Defense Department has already begun awarding multiyear contracts for munitions to encourage industrial investment. Brown said similar approaches could accelerate commercial technology adoption across other parts of the defense market. "I'd love to see that expanded beyond munitions, so that people can see what the demand signal is for a longer period of time," he said.
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